Nation's capital gets new sport: pinning blame for AIG

AIG-gravationHot game in D.C. is pinning blame for bonuses

Copyright 2009 Houston Chronicle

Published 5:30 am, Thursday, March 19, 2009

Having exhausted the possibilities of bashing AIG executives for awarding outlandish bonuses of $165 million to employees, many in its loss leader unit, the feeding frenzy by politicians and the media has moved on to the next phase: What did government officials know about the multimillion dollar gratuities, and when did they know it?

As Republicans sought to pin the bonuses on the donkey, two candidates quickly emerged. Treasury Secretary Timothy Geithner, who helped negotiate the original bailout of the insurance giant last November in his role as president of the Federal Reserve Bank of New York, denied being aware of their size at the time. He claimed not to have learned about the retention bonuses until earlier this month, and informed senior White House officials last week. AIG officials countered that officials of the Federal Reserve and the Treasury Department had known about the planned payouts since last fall. Geithner then admitted he should have known about the scope of the bonuses and accepted responsibility.

As pressure built in Congress to craft legislation to reclaim the money, Connecticut’s Democratic Sen. Chris Dodd initially denied having anything to do with removing a provision from the stimulus bill passed last month that would have banned executive bonuses negotiated before companies received federal assistance. He “clarified” that position a day later, claiming Treasury officials had pressured him to remove the provision when the bill, unanimously approved by the Senate, went to a conference committee.

Dodd put the onus on the Barack Obama administration, telling CNN the president’s team had expressed reservations about the bonus ban and asked for modifications. He claimed he reluctantly agreed to exclude previously negotiated bonuses from a ban on the compensation. Dodd, whose low poll standings at home have made him one of the most endangered Democratic incumbents standing for re-election in 2010, did himself no favors with the seemingly contradictory statements.

President Obama jumped to the defense of Geithner, saying he had not drafted the contracts with AIG and was doing an excellent job overseeing measures to stabilize the flagging financial system. Although the president took responsibility for the situation, he pointedly noted that the AIG bailout was crafted under the previous administration.

As the bonus blame game intensified, Democrats in the House of Representatives sought to get themselves off the hot spot by passing legislation to tax the bonuses at a 90 percent rate. Although decried by Republican leaders as a publicity stunt and illegal, the legislation sped through on a 328-93 vote, including yes votes from 85 GOP members. According to House Speaker Nancy Pelosi, “We want our money back and we want our money back now for the taxpayers.”

Now that both parties and the administration have indulged themselves to the max in denouncing AIG and attempting to pin blame or deflect responsibility for the situation, perhaps the focus of the national spotlight should return to the problem at hand: repairing the damaged economy and laying the groundwork for a speedy recovery.